Solarfun Reports Second Quarter 2008 Results
SHANGHAI, China, Aug 27, 2008 (BUSINESS WIRE) -- Solarfun Power Holdings Co. , Ltd. ("Solarfun" or "the Company") (NASDAQ:SOLF), an established vertically integrated manufacturer of silicon ingots and photovoltaic (PV) cells and modules in China, today reported its unaudited financial results for the second quarter ended June 30, 2008.
2008 SECOND QUARTER RESULTS
-- Net revenue was RMB 1.35 billion (US$ 197.1 million), an increase of 12.7% from the first quarter of 2008, and 192.2% from the second quarter of 2007.
-- PV module shipments reached 43.1 MW, an increase of 162% from the second quarter of 2007. Solarfun also shipped 5 MW of cells with specification levels that are different than the Company's mainstream business.
-- Average selling price ("ASP") improved to US$4.17 from US$4.07 in the first quarter of 2008. Business in Europe remained robust, with Germany, Spain and France accounting for 56%, 33% and 5% of net revenues, respectively.
-- Gross profit was RMB 185.6 million (US$ 27.1 million), an increase of 163.7% from the second quarter of 2007.
-- Gross margin decreased to 13.7% from 15.8% in the first quarter of 2008. The figure was in line with the Company's guidance and was primarily due to higher polysilicon and wafer costs.
-- Operating profit was RMB 116.4 million (US$ 17.0 million), an increase of 306.6% from the second quarter of 2007. Operating margins decreased to 8.6% from 11.8% in the first quarter of 2008 as the Company returned to more normal levels of spending to support growth, including a nearly RMB 2.9 million sequential increase in research and development expenses.
-- Interest expense rose over RMB 25.5 million (US$ 3.7 million) from the second quarter of 2007 to RMB 28.1 million (US$ 4.1 million) due to increased bank borrowings and the Company's convertible senior notes offering earlier in the year.
-- Currency gain was RMB 4.1 million (US$ 0.6 million) as a result of the appreciation of the RMB relative to the U.S. dollar.
-- Net income was RMB 78.1 million (US$ 11.4 million), a 285.2% increase over the second quarter of 2007.
-- Earnings per basic ADS were RMB 1.62 (US$ 0.24).
Harold Hoskens, CEO of Solarfun, noted "We are pleased with the progress achieved during the second quarter as we continued to see healthy demand and firm pricing. The tight supply and higher costs for polysilicon and wafers constrained both our top and bottom line growth, and our gross margins. This is a temporary situation with visibility improving on both measures during the second half of 2008, most notably during the fourth quarter. A number of important initiatives were completed following the close of the quarter which position us for continued growth going forward."
FINANCIAL POSITION
As of June 30, 2008, the Company had cash and cash equivalents of RMB 557.7 million (US$ 81.3 million) and working capital of RMB 2.2 billion (US$ 322.7 million). Total bank borrowings were RMB 1.28 billion (US$ 186.8 million), remaining relatively constant with the levels of the first quarter of 2008. Subsequent to the end of the second quarter of 2008, the Company raised US$ 71.9 million in net proceeds from a sale of 5,421,093 ADSs pursuant to a sales agency agreement with Morgan Stanley & Co. Inc.
The Company continued to improve its working capital management with improved inventory and accounts receivable management. Net accounts receivable were RMB 442.2 million (US$ 64.5 million). Days Sales Outstanding (DSOs) continued to improve to 37 days, down from 41 days in the first quarter of 2008. Inventories of RMB 823.4 million (US$ 120 million) were relatively constant with last quarter and inventory turnover days improved to 63 days versus 104 days from the same period in 2007.
* Capital outlays during the second quarter totaled US$ 57.2 million, of which US$ 42.4 million was for capital expenditures and US$ 14.8 million was for pre-payments to suppliers.
SIGNIFICANT SECOND QUARTER EVENTS
-- Signed an 8-year, 1.2 gigwatt ("GW") contract for virgin polysilicon with GCL Silicon Technology.
-- Purchased the remaining 48% interest in Jiangsu Yangguang Solar (a silicon ingot producer) that the Company did not already own.
SUBSEQUENT EVENTS
Following the close of the second quarter of 2008, the Company made a number of announcements, including:
-- Completed and successfully initiated production on four new manufacturing lines, increasing nameplate capacity by 120 MW to 360 MW.
-- Began early stage operation of an expanding wire saw facility at the Company's manufacturing facility in Qidong.
-- Signed a 47 MW sales contract to supply PV modules to Schuco International KG between December 2008 and October 2009, with installations targeted for the Middle East and south-east Europe.
-- Signed a 30 MW sales contract to supply PV modules to Martifer Solar Sistemas Solares, a leading solar project developer, installer and producer in Europe, from January through December 2009.
-- Concluded a letter-of-intent ("LOI") with Q-Cells AG for a three-year module supply agreement for the purchase by Q-Cells of no less than 100 MW of PV modules per annum using PV cells Q-Cells will provide from 2009 through 2011. The Company and Q-Cells intend to enter into an agreement to exchange technology to further enhance the development of highly efficient and low cost PV modules.
BUSINESS OUTLOOK
Based on current operating trends and other conditions, the Company's outlook is as follows:
For the remainder of 2008, management expects:
-- Continued strong demand. Based on contracted sales volume, guidance for 2008 shipments has been raised from 160-180 MW to 175-190 MW. In constant Euro terms (the currency in which the majority of the Company's sales are recorded) pricing is expected to be relatively stable for the remainder of the year.
-- Gross margins for the second half of 2008 are expected to improve from levels seen in the second quarter of 2008, although the Company expects that polysilicon and wafer pricing will continue to be high during the third quarter of 2008. Margin improvements from lower supply costs and other benefits related to greater vertical integration are expected to become more meaningful during the fourth quarter of 2008.
-- Operating expenses as a percent of revenues are expected to remain in the 5-6 % range.
-- Capital expenditures for the remainder of 2008 are anticipated to approach US$ 90 million, and an additional $70-$80 million for supplier prepayments and the LYG equity acquisition. Cash on hand and access to additional commercial debt is viewed as adequate to fund the Company's capital outlays for the remainder of 2008.
For the Full Year 2009, management expects:
-- Total shipments to rise 50% from the revised full-year guidance range of 175-190 MW for 2008. The Company has good visibility on 200 MW of contracted sales volume for 2009, one-half of which is secured through signed contracts.
-- ASP's to decline 5-10% from the expected full-year 2008.
-- The Company's polysilicon and wafer needs are 100% secured, of which approximately two thirds are in the form of long-term contracts.
-- Through the reduction in polysilicon-related costs and the benefits of vertical integration, the Company foresees the potential to improve gross margins 500 basis points for full-year 2009.
-- Management's current projections call for a further 120 MW of integrated cell and module capacity expansion in 2009. A further 100MW of module capacity will be added and dedicated to the Company's aforementioned arrangement with Q-Cells.
-- These projections assume constant currencies (Euro vs. US Dollar), management's ability to execute its vertical integration ramp, and to a lesser extent, dependence on raw material suppliers meeting contractual obligations for timely delivery.
Harold Hoskens concluded, "We are on track for a solid year of growth in 2008 and have positioned ourselves for meaningful progress in 2009. Although near-term supply constraints and higher costs persist, we see visibility for better conditions beginning in the fourth quarter of this year and further improvements throughout 2009. Demand is good. Our brand is growing worldwide. Customers recognize our low-cost and high quality manufacturing platform and are contracting their production needs with us. We are secure in our supply needs for next year and our vertical integration strategy will begin to show meaningful benefits starting in the final quarter of this year."
Conference Call:
Management will host a conference call to discuss the results at 8:00 am U.S. Eastern Time (8:00 pm Shanghai time) on August 27, 2008.
The dial-in details for the live conference call are as follows:
- U.S. Toll Free Number: +1 866 713 8563
- International dial-in number: +1 617 597 5311
- China Toll Free Number: 10 800 130 0399
Passcode: SOLF
A live webcast of the conference call will be available on the investor relations section of the Company's website at: http://www.solarfun.com.cn. A replay of the webcast will be available for one month.
A telephone replay of the call will be available for twenty-four hours after the conclusion of the conference call. The dial-in details for the replay are as follows:
- U.S. Toll Free Number: +1 888 286 8010
- International dial-in number: +1 617 801 6888
Passcode: 42684940
Foreign Currecy Conversion
The conversion in this release of Renminbi into U.S. dollars is made solely for the convenience of the reader, and is based on the noon buying rate in The City of New York for cable transfers of Renminbi as certified for customs purposes by the Federal Reserve Bank of New York as of June 30, 2008, which was RMB6.8591 to US$1.00. No representation is intended to imply that the Renminbi amounts could have been, or could be, converted, realized or settled into U.S. dollars at that rate on March 31, 2008, or at any other date. The percentages stated in this press release are calculated based on Renminbi amounts.
Financial Statements
SOLARFUN POWER HOLDINGS CO., LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"),
except for number of shares and per share data)
For the three months ended
June 30 March 31 June 30 June 30
2007 2008 2008 2008
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
RMB RMB RMB USD
Net revenue
Photovoltaic modules 462,283 1,151,507 1,233,527 179,838
Photovoltaic cells 501 29,734 104,217 15,194
PV modules processing - - 3,229 471
Raw materials - 18,088 11,220 1,636
Total net revenue 462,784 1,199,329 1,352,193 197,139
Cost of revenue
Photovoltaic modules (391,855 ) (965,588 ) (1,056,912 ) (154,089 )
Photovoltaic cells (559 ) (27,918 ) (97,244 ) (14,177 )
PV modules processing - - (1,208 ) (176 )
Raw materials - (15,762 ) (11,273 ) (1,644 )
Total cost of revenue (392,414 ) (1,009,268 ) (1,166,637 ) (170,086 )
Gross profit 70,370 190,061 185,556 27,053
Operating expenses
Selling expenses (13,014 ) (21,055 ) (26,482 ) (3,861 )
G&A expenses (18,739 ) (22,520 ) (34,956 ) (5,096 )
R&D expenses (9,985 ) (4,784 ) (7,697 ) (1,122 )
Total operating expenses (41,738 ) (48,359 ) (69,135 ) (10,079 )
Operating profit 28,632 141,702 116,421 16,974
Interest expenses (2,694 ) (26,669 ) (28,148 ) (4,104 )
Interest income 4,159 2,381 1,368 199
Exchange gain / (losses) (10,371 ) 19,430 4,136 603
Other income 2,208 2,011 4,383 639
Other expenses (351 ) (12,323 ) (6,140 ) (895 )
Government grant - 124 114 17
Net income before income tax and minority interest
21,583 126,656 92,134 13,433
Income tax expenses (1,332 ) (18,730 ) (8,282 ) (1,208 )
Minority interest 20 (3,363 ) (5,763 ) (840 )
Net income 20,271 104,563 78,089 11,385
Net income attributable to ordinary shareholders
20,271 104,563 78,089 11,385
Net income per share
Basic 0.08 0.43 0.32 0.05
Diluted 0.08 0.41 0.31 0.05
Shares used in computation
Basic 240,024,754 241,181,882 241,340,409 241,340,409
Diluted 240,024,754 271,563,142 287,007,417 287,007,417
Net income per ADS
Basic 0.42 2.17 1.62 0.24
Diluted 0.42 2.06 1.54 0.23
ADSs used in computation
Basic 48,004,951 48,236,376 48,268,082 48,268,082
Diluted 48,004,951 54,312,628 57,401,483 57,401,483
SOLARFUN POWER HOLDINGS CO., LTD.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"),
except for number of shares and per share data)
March 31 June 30 June 30
2008 2008 2008
(Unaudited) (Unaudited) (Unaudited)
RMB RMB USD
ASSETS
Current assets
Cash and cash equivalents 595,158 557,748 81,315
Restricted cash 474,725 486,220 70,887
Accounts receivable, net 653,625 442,190 64,465
Inventories, net 780,851 823,379 120,042
Advance to suppliers 1,114,907 1,205,767 175,791
Other current assets 155,767 164,224 23,943
Deferred tax assets 5,065 14,423 2,103
Amount due from related parties 917 19,548 2,850
Total current assets 3,781,015 3,713,499 541,396
Non-current assets
Fixed assets -- net 857,612 1,134,301 165,372
Intangible assets -- net 93,800 93,317 13,605
Deferred tax assets 4,936 5,061 738
Long-term deferred expenses 200,026 195,124 28,447
Long-term investment 300 - -
Total non-current assets 1,156,674 1,427,803 208,162
TOTAL ASSETS 4,937,689 5,141,302 749,558
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term bank borrowings 988,082 1,074,152 156,602
Long-term bank borrowings, current portion 15,000 22,000 3,207
Accounts payable 187,965 170,791 24,900
Notes payable - 4,726 689
Accrued expenses and other liabilities 140,503 140,413 20,471
Customer deposits 90,654 76,415 11,141
Deferred tax liability 689 1,160 169
Amount due to related parties 21,851 10,493 1,530
Total current liabilities 1,444,744 1,500,150 218,709
Non-current liabilities
Long-term bank borrowings, non-current portion 170,000 185,000 26,971
Convertible notes payable 1,210,778 1,183,195 172,500
Long term payable 10,000 17,000 2,478
Deferred tax liability 8,990 8,942 1,304
Total non-current liabilities 1,399,768 1,394,137 203,253
Minority interests 111,783 175,106 25,529
Redeemable ordinary shares 32 32 5
Shareholders' equity
Ordinary shares 195 195 28
Additional paid-in capital 1,616,069 1,628,495 237,421
Statutory reserves 50,935 57,231 8,344
Retained earnings 314,163 385,956 56,269
Total shareholders' equity 1,981,362 2,071,877 302,062
TOTAL LIABILITIES AND SHAREHOLDERS' 4,937,689 5,141,302 749,558
EQUITY
Safe Harbor Statement
This news release contains forward-looking statements, as defined under the Private Securities Litigation Reform Act of 1995, such as the Company's business outlook for 2008, including third quarter and full year 2008 estimates for net revenue, PV product shipments, raw materials and product prices, PV cell production capacity and gross margins. Forward-looking statements involve inherent risks and uncertainties and actual results may differ materially from such estimates depending on future events and other changes in business climate and market conditions. Solarfun disclaims any obligation to update or correct this information.
About Solarfun
Solarfun Power Holdings Co, Ltd. manufactures both PV cells and PV modules, provides PV cell processing services to convert silicon wafers into PV cells, and supplies solar system integration services in China. Solarfun produces both monocrystalline and multicrystalline silicon cells and modules, and manufactures 100% of its modules with in-house produced PV cells. Solarfun sells its products both through third-party distributors, OEM manufacturers and directly to system integrators. Solarfun was founded in 2004 and its products have been certified to TUV and UL safety and quality standards. SOLF-G
http://www.solarfun.com.cn
SOURCE: Solarfun Power Holdings Co. , Ltd.
Solarfun Power Holdings Co., Ltd.
Investor Relations
86 21-6306-8907 IR@solarfun.com.cn or
Christensen
Roger Hu, +852-2117-0861 rhu@ChristensenIR.com
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